Fresh market vegetable farms at three scales of production
John Hendrickson, UW-Madison Center for Integrated Agricultural Systems
Growing produce is not the biggest hurdle facing most fresh market vegetable growers; earning a
reasonable living poses the greatest challenge. One way for farmers to analyze their operations in order to better meet their financial goals is to share information through farmer networks, conferences
and coffee shop talk. Farmers may feel reluctant to share financial information, however.
From 2002-2004, the Center for Integrated Agricultural Systems worked with a group of 19 growers
on a participatory, farmer-led case study. The growers collected data on their sales, labor and other
aspects of their businesses. They then created financial ratios that allowed them to compare small,
medium and large operations in a way that respected their confidentiality.
Their goal was not to provide a complete economic analysis, but to create a basis for comparisons
between farms and discussions of how to forge a quality livelihood from farming. Growers wanting a
standard economic analysis of their farms can use traditional balance sheets, financial statements, and
cash flow statements.
This is a summary of a longer report titled Grower to grower: Creating a livelihood on a fresh market vegetable farm. The report and this summary can help guide growers as they set financial and quality of
life goals for their farms and structure their operations to realize those goals. There is no ideal size
for a fresh market vegetable farm; growers need to use their management skills and economic analysis
tools to figure out the scale and level of mechanization that makes the most sense for them.
This case study involved a small number of farms that were not randomly selected. The results,
therefore, may not be generalized to other operations.
Participating Farms
Most of the farms in this project were located in Wisconsin, although a few were in neighboring
states. All but one used organic production practices. They ranged from less than one acre to over 70
acres, and were divided into three scale categories:
Market gardens had fewer than three acres in active production, not including fallow or cover
cropped areas. There were six market gardens in this project, with 0.5 to 2.7 acres in active
production.
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Market farms had between 3 and 12
acres in active production, not including
fallow or cover cropped areas. There
were eight market farms in this project.
Some of these farms were struggling with
issues of mechanization versus hand labor,
while others were among the more successful and stable in the study.
Vegetable farms produced crops on
more than 12 acres, not including fallow
or cover cropped areas. There were five
vegetable farms in this project. Four were
diversified organic operations. An additional non-organic farm that followed low-input, integrated
pest management (IPM) practices participated. Its numbers are not included in the stated averages
or ranges. Acres in production ranged from 15 to 80.
At all scales, growers used a variety of strategies for marketing, equipment, crop and labor needs.
Marketing: Selling produce directly to customers was the cornerstone of most growers’ marketing
plans. Most sold product through farmers’ markets, restaurants and retail outlets and Community
Supported Agriculture (CSA); pick-your-own and on-farm sales were less common. Many growers
used one dominant marketing outlet along with a variety of secondary outlets.
Equipment: Equipment value was defined as the growers’ estimate of current (resale) value of all
farming equipment of lasting or enduring quality, excluding farmers’ personal dwellings and land.
This is an imprecise measure that should be treated as a rough guide. Investment in
equipment per acre ranged from $2,011 to $26,784; the smallest farms with no tractors had the
lowest investment.
Crops: All of the organic farms in this study grew a wide variety of crops, although some were more
specialized than others. Diversification prevented pest buildups and provided some insurance against
crop failure. But learning to grow many different crops was challenging, and growers with a wide array of crops often could not justify specialized equipment purchases.
Labor: Labor hours on the market gardens with fewer than three acres ranged from 933 to 2,994
hours per acre, and averaged just under 2,000. Payroll amounted to between 0% and 42% of gross
sales. Labor on the 3 to 12 acre market farms ranged from 402 to 1,443 hours per acre and averaged
just under 850. Payroll expenses consumed as much as 34% of gross sales on these farms. Labor on
the four large-scale organic vegetable farms ranged from 462 to 613 total hours per acre and averaged 554. Payroll expenses consumed between 19% and 41% of gross sales.
Farm finances
The growers participating in this case study tracked their expenses, sales and labor hours over the
three years of this project. The averages and ranges for some measures and ratios are shown in the
table (opposite). The growers used additional ratios, described in the full report.
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Summary of financial measures for three different farm sizes
Market gardens under 3 acres
Market farms 3 to 12 acres
Vegetable farms over 12 acres
Gross sales/acre
Range
Average
$8,888-$25,605 $15,623
Range
$6,267-$15,276
Average
$11,121
Range
$6,750-$14,466
Average
$10,810
Net cash income/acre
$1,892-$9,487
$1,331-$8,547
$4,679
$1,103-$7,430
$3,757
Net cash to gross
Hourly wage for owner
$5,664
9% - 57%
36%
16% - 57%
40%
16% - 51%
$3.32-$6.57
$4.96
$2.26-$16.92
$7.45
$3.46-$14.90
31%
$11.36
Gross sales per acre: Small plantings of organic, fresh market vegetables, herbs, flowers and berries
can garner large gross sales. The farms in this study realized three-year average annual gross sales between $6,267 and $25,605 per acre. The most impressive gross sales per acre were seen at the smallest scale. These gross sales per acre figures are based only on the land being used for cash crops in a
given year. If land in cover crops or fallowed were included, these figures would be lower for most
farms. Some farms had additional farm income from other enterprises, which were not included.
Net cash income per acre: Expenses, especially labor costs, can quickly eat into gross sales on a
vegetable farm of any size. Net income matters most in terms of financial sustainability. The term
'net cash income' is used here to describe a farm’s gross sales minus all current year cash expenses. In
the growers' own words, they wanted to know “how much cash they had at the end of the season to
provide for themselves and their households—and perhaps take a vacation.” Factors such as prescribed machinery use and land costs, depreciation and opportunity costs were not included.
Three-year average net cash income for the farms in this study ranged from under $2,000 to over
$8,000 per acre. Under 3-acre market gardens experienced more year-to-year variation in net cash
income per acre than the two larger farm types.
Community Supported Agriculture (CSA) appeared to help stabilize income. CSA farms are assured
relatively steady sales because members pay for their share of the harvest at the beginning of the year.
Other marketing strategies are subject to the vagaries of the marketplace and weather.
Comparing net cash income to gross sales: Dividing net cash income by gross sales results in a
net cash to gross ratio. Higher net cash to gross ratios were strongly associated with farms that concentrated on CSA. The smaller farms with
higher net cash to gross ratios had lower payroll expenses, with the farmer doing the bulk
of the work and keeping more money. Some
larger farms maintained high net cash to
gross ratios through careful training and
management of labor crews.
Hourly wage: Hourly wages were calculated by dividing the growers’ reported net
cash income by hours worked. Grower average hourly wages were as low as $3.32 on a
small farm and as high as $14.90 on a large
farm, averaging $7.45 for all farms.
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4
Livelihood and quality of life
Most of the small market gardens provided part-time livelihoods for the growers. For most of the
market farmers with 3 to 12 acres in production and all of the vegetable farmers with over 12 acres
in production, farming represented a primary or full-time livelihood.
All of the growers in this study reported that they were generally, but not overwhelmingly, pleased
with their quality of life. They said that they would like more personal time, health insurance and retirement security. The mid- and large-scale growers also felt that dedicated, skilled employees would
improve their quality of life.
There is no universal recipe for success as a vegetable grower. Farmers who excel have a passion for
growing and often have business and marketing savvy. Employee management skills are also
important. Keys to financial success included increasing work efficiency and utilizing techniques and
tools to keep expenses low. Four of the five farms that focused on CSA as their sole or primary
marketing outlet were among those with the highest net cash income per acre in the study.
Special challenges
There are many challenges faced by vegetable growers that may vary with scale of production. Some
of the most common are:
1. Finding affordable land near urban markets, including enough for crop rotations.
2. Achieving a scale of production and marketing that meets net cash income needs and goals without
extensive paid labor.
3. Balancing hand labor with scale-appropriate, inexpensive tools and machinery.
4. Finding and managing employees who are a good match with a farmer's management style and who
will stay longer than a season.
5. Balancing the demands of a farm with personal time, health
considerations, personal and social relationships, raising children,
and, in some cases, off-farm jobs.
If you would like to learn more about the financial information and
ratios described here, please see Appendix A and B of the full
report Grower to grower: Creating a livelihood on a fresh market vegetable
farm. This report is available from CIAS at the address below and at
www.cias.wisc.edu. If you have questions, contact John
Hendrickson at the Center for Integrated Agricultural Systems:
telephone: 608-265-3704, e-mail: [email protected].
C
I
A
S
Center for Integrated Agricultural Systems
1535 Observatory Drive, UW-Madison, Madison, WI 53706
Phone: (608) 262-5200 www.cias.wisc.edu
UW-Madison College of Agricultural and Life Sciences • February, 2006
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